USD/CAD Forecast Jan. 21-25 – Canadian dollar rally pauses


The high-flying Canadian dollar took a breather last week, as USD/CAD was almost unchanged.  This week’s key events are consumer spending reports. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.

There were no Canadian events until Thursday, which helped explain the lack of movement from USD/CAD last week. Canadian ADP nonfarm payrolls was down 13,000, its second decline in three months. Headline inflation climbed 2% in December on an annual basis, which is the BoC’s target for inflation.

Risk sentiment has been strong in January, which has boosted the Canadian dollar. The U.S-China trade war remains a significant concern for Canadian policymakers, with the U.S. threatening more tariffs in March 1. However, there is hope that the conflict could ease, with a second round of negotiations scheduled at the end of January in Washington.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:

  1. Manufacturing Sales: Tuesday, 13:30. The U.S-China trade war has weighed on the export and manufacturing sectors. Manufacturing sales has posted declines in two of the past three months. The November reading of -0.1% missed the estimate of 0.3%.
  2. Retail Sales Data: Wednesday, 13:30. These key consumer spending indicators should be treated as a market-movers. Core retail sales posted a flat reading of zero in November, shy of the estimate of 0.2%. Retail Sales edged up to 0.3%, but missed the forecast of 0.4%.

*All times are GMT

USD/CAD Technical Analysis

It was an uneventful week for USD/CAD, which traded in a narrow range. The line of 1.3265 (mentioned last week) was busy throughout the week. With the pair almost unchanged over the course of the week, our technical analysis remains intact:

Technical lines from top to bottom:

We begin with resistance at 1.3662. This line marked a high point at the start of January, when the Canadian dollar started the current rally.

1.3560 capped $/CAD in May 2017. Next, 1.3445 was the peak in early December.

1.3385 was the high point seen in May. 1.3350 was a stepping stone on the way and on the way down around the same time.

Lower, 1.3265 was the high point in mid-November. 1.3225 was tested in support, as the pair posted strong losses before recovering late in the week.

1.3175 was a swing low in late November. It is followed by 1.3125 which was also a low point, earlier in the month.

Below the 1.3000 level, we find the late-October trough of 1.2970.

1.2880 was a double-bottom in September and in August.

I am neutral on USD/CAD

Low oil prices and a weaker global economy could weigh on the Canadian dollar. At the same time, the currency has benefited from strong risk appetite in January.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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